When Food Stamps Became Free: Impacts and Implications of Removing the Purchase Requirement

We analyze the food stamp program both as a potential investment in children’s health capital and as a redistributive tool by studying the 1979 reform that made food stamps free. We leverage geographic variation in exposure to the reform, which raised the program’s food subsidy from 65% to 100%. This raised enrollment by 1.85 percentage points (standard error = 0.15), or about 25%, with new enrollees substantially poorer than existing participants. From an investment perspective, we do not find evidence of improvement in infant health, and 95% confidence intervals rule out gains in birth weight from enrolling in food stamps exceeding 2%. From a redistribution perspective, the enrollment response implies that the average recipient of free food stamps acts as if they value them at 59 cents per dollar, with nonparametric bounds of 42–77 cents. Despite this substantial dissipation in transfer value relative to a frictionless cash transfer, under standard redistributive preferences the free food stamp program increases social welfare because of its targeting to very low-income households. The move to free stamps from a partially subsidized program improved targeting on social value but worsened targeting on private value.